Are you making the case that money supply don't matter?
I didn't mean to imply that the deficit target should constant by the way.
No, the money supply matters, but only with respect to the real world, i.e., unemployment and inflation. As long as you are optimizing those--and by that I mean minimizing unemployment and inflation--then whatever number the deficit tuns out to be is irrelevant. It can be 0 or it can be 70 bazillion. Doesn't matter, it's just a unit of account, an abstraction. It's supposed to be a tool to facilitate trade and an optimized economy, so let's use it that way. That means directing our attention towards the economy and not the abstract tool. If I am constructing a building, I try to make sure that everything I do goes toward optimizing its construction. The number of shovels I need is dictated by the construction requirements. If somebody told me I had to start obsessing over keeping the number of shovels within a certain range without regard to their need for optimizing the efficiency of the construction project, that person would be a crazy person. (Not the best analogy, I know, but it works well enough and I've not the time to think up a better one.)
The problem with deficit targets, besides focusing on a social abstraction having no real meaning in itself, is that the deficit is not controllable. The government can control how many dollars it will inject. It cannot control how many dollars it will get back, at least via the current means of taxation it relies upon. So you can never actually have a deficit target, or, at least, it's a fool's errand to have one. This is why attempts at deficit reduction by cutting spending can have the effect of increasing the deficit when tax receipts are reduced by even more than spending was cut. That happens because the government is only in control of one side of the equation. It is the strength of the economy that will largely dictate tax receipts. What the government should be doing is not deficit targeting but taking an appropriate fiscal orientation. A government can take an expansionary fiscal position by increasing its net spending (increase spending and/or cutting taxes) when there is insufficient aggregate demand and too much slack in the economy (unemployment). It can take a contractionary fiscal position by reducing its net spending (decreasing spending and/or raising taxes) to stem anticipated inflation. The size of the changes in net spending would be based solely on what is needed to optimize the real economy. And here again, the deficit number produced is totally irrelevant.
Note that with sequestration, the government is taking a contractionary fiscal position. This means it is trying to slow down the economy and increase unemployment. It thinks it is doing this to reduce the deficit, even though the deficit has no meaning to anybody (unlike one's job). The result, if not reversed, will be to increase the deficit as tax receipts fall like a rock.
